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All eyes on jobs Friday yet again

A help wanted sign is posted on the front window of a clothing boutique in Los Angeles. Unemployment numbers are rising in cities as more people begin to look for work again.(Photo: Damian Dovarganes AP)

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Be ready for Friday jobs report to move the market, as has become the pattern

Fed said it will phase out quantitative easing when the jobless rate declines to 7%

NEW YORK — How many jobs the government says were created in June will again move markets Friday, again prompt questions about the timing of the dialing-down of the Federal Reserve's monthly bond-buying program, and again prompt questions about the health of the U.S. economy.

The monthly jobs number has become increasingly important to Wall Street ever since the Fed cited the unemployment rate, currently at 7.6%, as the key data point in what it says will be a data-dependent exit strategy for its market-friendly stimulus aimed at keeping borrowing rates low and spurring job creation.

The Fed has said that a decline in the jobless rate to 7%, which the central bank expects to occur by mid-2014, is a level that would likely coincide with the full phasing out of its so-called quantitative easing program, dubbed "QE."

Since the bull market began in 2009, QE, of course, has often been cited as a big driver of the stock market rally. Stock investors fear that the market will suffer for a period when the Fed tapers its $85 billion in monthly purchases of mortgage-backed bonds and long-term government bonds to zero.

For now, there's likely more investor interest in how many jobs the economy is adding than there is the jobless rate, which has hovered between 7.9% and 7.5% the past nine month. The June unemployment rate is forecast to fall to 7.5% from May's 7.6%.

According to the median forecast of economists by Dow Jones, June nonfarm payrolls grew by 160,000 vs. 175,000 last month. TrimTabs Investment Research, citing a spike in real estate activity due to rising interest rates, projects 182,000 jobs were added in the month. Barclays expects just 150,000 new jobs.

The potential that the number will best economists' expectations was boosted Wednesday, when payroll processor ADP said a better-than-expected 188,000 private-sector jobs were created in June, and the government reported a bigger-than-expected 5,000 drop in initial claims for unemployment benefits jobless to 343,000.

The question for investors Friday is whether a strong -- or good -- jobs number will be viewed as good news since that would likely mean a quicker start to the Fed's QE exit.

Quite a few Fed governors have tried to clarify in public remarks the past few weeks where the central bank stands on the timing of its QE taper strategy. However, some further context for the June employment report will be available for investors on July 10, when minutes of the Fed's June 18-19 policy-making meeting are released, and Fed chief Ben Bernanke is slated to speak in Boston about the economy and monetary policy.